About half the consumables purchased by NHS acute and foundation trusts can actually be more expensive when bought through NHS Supply Chain, the national supplies organisation, than when purchased through other routes, says a Parliamentary report.
NHS Supply Chain, which is operated by the private distribution company DHL under a 10-year contract to the NHS Business Services Authority, is not demonstrating its value to the NHS, and trusts are not using it to the extent that was expected when the contract was set up in 2006, says the House of Commons Committee of Public Accounts (PAC).
While NHS Supply Chain should provide the opportunity for trusts to bulk-buy together and thus drive down prices on the basis of their commitment to purchase, it currently purchases only around 5% of the goods it supplies on a "committed" basis, say the MPs, and they call on the Department of Health to assess regularly whether the organisation is "subject to the right level of competitive pressure."
The NHS' fragmented system of procurement has produced a great deal of waste, with trusts being charged different prices for the same goods, ordering in inefficient ways and failing to control the range of products which they purchase, says the Committee report. It points out that the National Audit Office (NAO) has estimated that trusts could save around £500 million annually, or 10% of their spending on consumables, by amalgamating small orders into larger, less-frequent ones, rationalising and standardising product choices and striking committed volume deals across multiple trusts.
The report finds that "a culture of efficient procurement is lacking in the NHS," with poor information on the products which trusts buy and the prices they pay, and that regional purchasing structures "are confused and lack transparency." The MPs call on the Department to address the current lack of data, which they say has limited progress towards more efficient procurement, making it difficult for trust boards to challenge managers on the efficiency of procurement. Nor has there been sufficient control over procurement practices, they add.
The Department is engaged in improving its procurement systems, and it sees the future for NHS procurement as a pyramid structure, with national, regional and local procurement of different types of goods, as appropriate to the products and the supplier markets, say the MPs. But, they warn, this theoretical model does not reflect the current complex reality, and its effectiveness is open to question in the emerging landscape of foundation trusts acting independently, with no explicit incentive to co-operate.
Getting this system right is critical and, at a time when all NHS trusts are required to make efficiency savings - of 4% in 2011-12 alone - they should seek to achieve as much of these as possible from improvements in procurement, say the MPs, and they warn: "without such improvements there is a risk that trusts will make cuts elsewhere, while at the same time continuing to waste money on efficient procurement."
"When resources are so tight it is simply unacceptable that money is being wasted by paying more than necessary on everyday products," said Margaret Hodge, the Labour MP for Barking who chairs the PAC. The Department should specifically spell out how, in the new NHS landscape in which foundation trusts act independently, they will be motivated to deliver collectively the £1.2 billion savings targeted for procurement under the Quality, Innovation, Productivity and Prevention (QIPP) programme - “and who will be accountable," she added.